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ICICI Bank in flotation rush

Mumbai, Nov. 17: ICICI Bank, the aggressive private sector bank, has made a filing with the US Securities and Exchange Commission (SEC) to issue 118.4 million shares as part of its plans to raise Rs 7000 crore through a blockbuster issue on the domestic and overseas markets.

The country’s second- largest bank plans to issue the shares in the form of American Depository Shares (ADS). Each ADS will have two underlying equity shares.

Banks have been scrambling to hit the capital markets with a blizzard of public issues with the markets entering one of the longest bull runs. They have also been driven by the fact that they need to shore up their capital adequacy ratios before the new Basel II norms come into effect from March 2007.

ICICI Bank is hoping to be among the first to hit the markets and may tie up all the regulatory approvals for a simultaneous public issue on the domestic and overseas markets.

Although ICICI Bank has sought permission to float over 118 million shares overseas, this is really designed to give it the necessary headroom if it does indeed exercise the 15 per cent greenshoe option. Sources close to the bank say it will float considerably more shares on the domestic markets than overseas.

Last October, the board of directors of the bank had approved plans for a Rs 7,000- crore float. If the greenshoe is exercised, the issue size will swell to Rs 8,050 crore.

Officials from the bank clarified that while the registration statement filed with the US SEC seeks to register up to 118.4 million equity shares, the final sizes of the Indian offering and the ADS offering, respectively, will be determined prior to the filing of the bank’s red herring prospectus with the Registrar of Companies in India and it will take into account the foreign ownership restrictions and regulatory approvals.

Although ICICI Bank has not specified the number of American Depository Shares (ADS) that will be offered, it told the SEC that each ADS offered will represent two equity shares of the bank.

On this basis, the bank can offer up to a maximum of 59.2 million ADS. If one were to go by the last reported sale price of its ADS on the New York Stock Exchange on November 16 at $25.67 per ADS (at the time of filing the document), the size of the ADS issue can be up to $1.5 billion. However, bank officials do not agree with this figure, pointing out that it is premature to arrive at this number as the quantum of ADS to be offered or its price is yet to be fixed.

In its filing with the SEC, the bank said its objective is to enhance its position as a provider of banking and other financial services in India and to leverage its competencies in financial services and technology to develop an international business franchise.

According to the bank, the key elements of its business strategy is to focus on quality growth opportunities wherein the retail financial services market holds enormous potential for growth. The bank also wants to build an international presence and a rural banking franchise.

“The objects of the offering are to augment our capital base to meet the capital requirements arising out of growth in our assets, primarily our loan and investment portfolio due to the growth of the Indian economy, compliance with regulatory requirements and for other general corporate purposes, including meeting the expenses of the ADS offering,” the bank told the SEC.

Merrill Lynch, Morgan Stanley and Nomura will be the lead managers to the ICICI Bank issue.

In April 2004, ICICI Bank had come out with a Rs 3,050-crore public issue that was offered at Rs 280 per share. On Thursday, the ICICI Bank scrip closed at Rs 545.65, up Rs 12.65 on BSE.

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